Hi Everyone,
I'm new to the forum…great site, love the vibe. I'm hoping for some feedback on our retirement plan.
Here is our story. I'm 49 and my wife is 42, looking to retire early, maybe next year. We have one young child.
Net worth $7.2 million

Expenses $150K including $20K for travel budget.
We would like to increase our discretionary spending, mainly for travel, in retirement.
We are hoping to have a total spending budget of about $200K after taxes and health insurance.

I figure 4% of our liquid assets, minus taxes and health insurance should get us there. We plan on using a flexible 4% rule, not fixed. After a market drop, our spend could drop by $60K from $200K without terribly affecting our base standard of living. Firecalc seems to suggest that this scenario is reasonably safe, though I don't know if I've allocated enough for taxes.

Cushions to mitigate risk of going broke long term:
-Flexible 4% withdrawal, only taking 4% of each years liquid assets, even after a market drop.
-Social security and medicare kick in in 15-20 years
-Home equity ($1.1 million) not included in calculation, useful in potential downsizing or reverse mortgage in worst case scenario.
-Most expenses from our child, including expensive private school ($30k/yr), will hopefully go away in 15 years.

I know we are very fortunate. Are we being to bold, or too conservative?

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We have a similar financial situation and I think you are in good shape. A few things to consider:
1) pay off house before ER (mostly for peace of mind)
2) LTC policy to avoid being hit with large unexpected expenses.
3) Health insurance: my advisor for health insurance says to plan on about $1600/mo in todays dollars and plan on a 10%/yr rate hike. Don't forget your wife will require insurance for another 23 years.
4) Have you considered moving to a district where the public school system is good? 15 years at $30k/year after taxes is a lot of money. I am in an excellent school district and I just pulled my kids out of private school and am sending them to public school. The private school here is not $25k/yr better than the public school...

Have a good asset allocation plan for your investments. I would do something like 110-age in equities. Are you managing your own investments? There's no reason you should be spending $50K or more (1%) for an adviser to maybe beat the market, maybe not, when you can index the market through Vanguard or Fidelity.

Thanks everyone for the replies
-16K/month for insurance sounds a little more than I anticipated, but still within reason. How long can it grow at 10%/year. Something has to give at some point.

-Yes, we would like to move to an area with good public schools and reduce that cost! Would be huge.
-Will likely pay off the mortgage upon ER. More to reduce market risk than to impact expenses.
-I manage my own investments.
-Asset allocation is an issue. Right now for investable assets we have:
20% cash
11% company stock
50% large cap stock (U.S.)
10% small cap value
9% in Europe ETF, emerging markets stock fund, bond fund.

I'm scared of bonds right now, and hate the way their dividends are taxed. I "hedge" my large stock allocation with a large pile of dry powder cash. I am a little worried about how to reallocate for a more conservative allocation in ER. Any suggestions very welcome.

Thanks for all of the suggestion!! And the moral support as we approach this difficult yet exciting decision.

As far as taxes go, you can probably see what kind of dividends and CG distributions your investments are throwing, and also reduce your equity holding by 15% of any unrealized capital gains you have and just pay the LTCG taxes as you sell any appreciated holdings. You might be as high as 25% tax on your retirement account, though you'll have some room in the 0/10/15% ranges so effectively it's probably more like 20%. Plus state taxes on all this.

Consider inflation when it comes to school. 4 years of medical school in the early 80s: $40K for all expenses at UCLA. Now tuition alone is $36K per year. It won't be long before tuition at private colleges tops $100K annually. If you need to cut education cost without cutting quality, when FIRE'd, you could consider moving to a lower cost (and perhaps warmer) area where the public schools are great. Check out GreatSchools.org for some ideas. My DS has a learning disability which required a lot of extra help in his early years. Thank goodness he was in an excellent public school and the issue was appropriately addressed.

You should keep your WR under 4% for such a long retirement. But with that amount in investments, it sounds like you'll have a great life! Congratulations.

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